Question
A profit-maximizing monopolist sets an output of 100
per day and a price of £10. Which of the following statements is true?Solution
Statement a is true. The intersection of SMC and MR is always best, unless it results in a loss that exceeds the firm's total fixed costs, in which case it is better to shut down and produce nothing. To find the price a price-setter must set, we always look at the point on its demand curve at the output it wishes to sell.
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